Gold prices were on track for their sharpest daily decline in five years on Tuesday (October 21st), as investors took profits after expectations of a US interest rate cut and continued demand for safe-haven assets pushed the precious metal to a record high in the previous session.

Spot gold prices fell 5.5% to a one-week low of $4,115.26 an ounce at 1:45 a.m. EDT (1745 GMT), the steepest decline since August 2020. US gold futures for December delivery closed 5.7% lower at $4,109.10 an ounce.

Prices hit an all-time high of $4,381.21 on Monday and have risen about 60% this year, driven by geopolitical and economic uncertainty, speculation of interest rate cuts, and continued central bank buying. "Gold prices remained bearish yesterday, but the sharp spike in volatility at the highest levels over the past week suggests caution and may prompt at least some short-term profit-taking," said Tai Wong, an independent metals trader.

The dollar index rose 0.4%, making bullion more expensive for holders of other currencies. "Improved risk appetite in the general market earlier this week is bearish for safe-haven metals," said Jim Wyckoff, senior analyst at Kitco Metals, in a note.

Citi analysts said in a note that they expect the end of the ongoing US government shutdown, as well as the announcement of a US-China trade deal, to contribute to gold price consolidation over the next two to three weeks.

Spot silver fell 7.6% to $48.49 per ounce.

"Silver is on a tear today and has dragged the entire complex down," Wong said. "We appear to have reached a short-term top at $54, and although market sentiment fluctuates below $50, silver is likely to trade sideways with substantial volatility as long as gold remains relatively stable."

Elsewhere, platinum fell 5.9% to $1,541.85 and palladium fell 5.3% to $1,417.25.

Traders await the release of the US consumer price index report for September on Friday, which was delayed due to the US government shutdown. The report is expected to show a 3.1% year-on-year increase. Markets expect the Federal Reserve to cut interest rates by 25 basis points at its policy meeting next week. (alg)

Source: Reuters